3 Hold-Rated Dividend Stocks: FSFR, OCIR, RNF

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Fifth Street Senior Floating Rate

Dividend Yield: 11.90%

Fifth Street Senior Floating Rate (NASDAQ: FSFR) shares currently have a dividend yield of 11.90%.

Fifth Street Senior Floating Rate Corp. was incorporated in 2013 and is based in White Plains, New York. The company has a P/E ratio of 10.21.

The average volume for Fifth Street Senior Floating Rate has been 134,700 shares per day over the past 30 days. Fifth Street Senior Floating Rate has a market cap of $297.9 million and is part of the financial services industry. Shares are down 0.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Fifth Street Senior Floating Rate as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • FSFR's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 249.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for FIFTH STREET SR FLTG RATE CP is currently very high, coming in at 70.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 55.03% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$22.08 million or 45.96% when compared to the same quarter last year. Despite an increase in cash flow of 45.96%, FIFTH STREET SR FLTG RATE CP is still growing at a significantly lower rate than the industry average of 190.66%.
  • FIFTH STREET SR FLTG RATE CP's earnings per share declined by 15.4% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.18 versus $0.97).
  • Looking at the price performance of FSFR's shares over the past 12 months, there is not much good news to report: the stock is down 30.66%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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OCI Resources

Dividend Yield: 9.10%

OCI Resources (NYSE: OCIR) shares currently have a dividend yield of 9.10%.

OCI Resources LP engages in the trona ore mining and soda ash production businesses in the United States and internationally. It processes trona ore into soda ash, which is a raw material in flat glass, container glass, detergents, chemicals, paper, and other consumer and industrial products. The company has a P/E ratio of 10.03.

The average volume for OCI Resources has been 31,200 shares per day over the past 30 days. OCI Resources has a market cap of $231.4 million and is part of the metals & mining industry. Shares are down 7.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates OCI Resources as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 3.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.24, which clearly demonstrates the ability to cover short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, OCI RESOURCES LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • The gross profit margin for OCI RESOURCES LP is currently lower than what is desirable, coming in at 31.56%. Regardless of OCIR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.63% trails the industry average.

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Rentech Nitrogen Partners

Dividend Yield: 9.90%

Rentech Nitrogen Partners (NYSE: RNF) shares currently have a dividend yield of 9.90%.

Rentech Nitrogen Partners, L.P. produces and sells nitrogen fertilizer products in the United States and internationally. It operates through two segments, East Dubuque and Pasadena. The company has a P/E ratio of 121.75.

The average volume for Rentech Nitrogen Partners has been 103,200 shares per day over the past 30 days. Rentech Nitrogen Partners has a market cap of $568.5 million and is part of the chemicals industry. Shares are up 41.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Rentech Nitrogen Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 14.0%. Since the same quarter one year prior, revenues rose by 22.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Chemicals industry and the overall market, RENTECH NITROGEN PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • RENTECH NITROGEN PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RENTECH NITROGEN PARTNERS LP swung to a loss, reporting -$0.03 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus -$0.03).
  • RNF has underperformed the S&P 500 Index, declining 12.34% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio is very high at 52.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, RNF has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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